Update to article as of March 4, 2024:
On Friday, March 1 a Federal District Court ruled the Corporate Transparency Act unconstitutional, effectively stating that the law went beyond the powers delegated to Congress. For now, this ruling only removes enforcement against the specific plaintiff, and does not represent a reversal or repeal of the law. Existing entities prior to 2024 have a reporting deadline of year end. New entities created in 2024 are supposed to report within 90 days of incorporation. Some are advising that companies that existed prior to January 1, 2024 that have not reported yet consider waiting 3-4 months to see how other courts deal with this ruling (especially if the reporting entity would incur legal or administrative fees to complete the filing).
A new law that sounds like it is for corporate America will have a much larger scope, including for persons with small businesses or LLCs used to own real estate. The CTA, or Corporate Transparency Act, went into effect on January 1, 2024. The federal law imposes disclosure requirements on domestic corporations, LLCs, and similar entities, as well as foreign entities registered to do business in the U.S.
Who is required to file?
The Corporate Transparency Act will affect just about every small business. There are some exceptions to this new requirement including banks and financial institutions that are already regulated by the federal government, some publicly traded companies, and certain “large operating companies”. At present, the new law also does not appear to require trusts to file; however, a reporting company may need to disclose information about a trust if the trust is an owner of that reporting company. Charities are exempt from reporting, as well as private operating companies with a physical presence in the U.S. with more than 20 full-time employees, and gross receipts or sales of more than $5 million.
The Financial Crimes Enforcement Network, also known as FinCEN, published a compliance guide that includes a questionnaire and checklists to help you determine whether your business is required to file or if your company qualifies for a exemption.
What is required to be filed?
Reporting entities must submit details about owners and managers, including persons who directly or indirectly control a company. The data collected is known as BOI, or Beneficial Ownership Information. The intent of the law is to maintain an even playing field for honest and legitimate businesses while reducing opportunities for bad actors to launder funds and avoid prosecution.
When is the deadline to file?
Entities formed prior to 2024 must submit information prior to January 1, 2025. New entities formed during 2024 must submit data within 90 days of formation.
How do I file?
Congress has tasked the US Treasury Department through FinCEN to collect this data via an online filing at www.fincen.gov/boi.
Filing is free of charge. Filing only needs to be done once, not annually, if the entity does not need to update any of the beneficial owner information. If there are updates or corrections, those should be reported within 30 days.
Where can I learn more about the Corporate Transparency Act?
You can find guidance materials and additional information at www.fincen.gov/boi.
Attorneys and accountants may assist clients who are shareholders, partners, or officers of an entity and help determine if reporting is required. Please note that people offering to file on your behalf or demanding compliance may be attempting to collect sensitive data fraudulently. Be wary of unsolicited requests or URLs or QR codes.
Heritage is not able to file on your behalf or legally determine your requirement to file or use a reporting exemption. However, we can help direct you to those who might provide representation and counsel if needed.
